Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended | |
Sep. 30, 2014 | Nov. 13, 2014 | |
Document And Entity Information | ' | ' |
Entity Registrant Name | 'HealthWarehouse.com, Inc. | ' |
Entity Central Index Key | '0000754813 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 30-Sep-14 | ' |
Amendment Flag | 'false | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Is Entity a Well-known Seasoned Issuer | 'No | ' |
Is Entity a Voluntary Filer? | 'No | ' |
Is Entity's Reporting Status Current | 'Yes | ' |
Entity Filer Category | 'Smaller Reporting Company | ' |
Entity Common Stock, Shares Outstanding | ' | 37,570,383 |
Document Fiscal Period Focus | 'Q3 | ' |
Document Fiscal Year Focus | '2014 | ' |
CONDENSED_CONSOLIDATED_BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
Current assets: | ' | ' |
Cash | $505,058 | $67,744 |
Restricted cash | 650,074 | ' |
Accounts receivable, net of allowance of $50,957 and $250,828 as of September 30, 2014 and December 31, 2013 | 149,189 | 307,211 |
Inventories - finished goods, net | 140,336 | 277,300 |
Prepaid expenses and other current assets | 72,125 | 59,143 |
Total current assets | 1,516,782 | 711,398 |
Property and equipment, net of accumulated depreciation of $665,238 and $576,590 as ofSeptember 30, 2014 and December 31, 2013 | 535,986 | 624,634 |
Web development costs, net of accumulated amortization of $53,205 and $14,643 as of September 30, 2014 and December 31, 2013 | 143,218 | 83,780 |
Total assets | 2,195,986 | 1,419,812 |
Current liabilities: | ' | ' |
Accounts payable - trade | 2,938,264 | 3,310,000 |
Accounts payable - related parties | 48,674 | 83,691 |
Accrued expenses and other current liabilities | 922,352 | 621,052 |
Deferred revenue | 4,121 | 95,792 |
Current portion of equipment lease payable | 62,440 | 56,323 |
Notes payable and other advances, net of debt discount of $103,299 as of September 30, 2014 | 646,701 | ' |
Note payable and other advances - related parties | 73,095 | 78,095 |
Redeemable preferred stock - Series C; par value $0.001 per share; 10,000 designated Series C: 10,000 issued and outstanding as of September 30, 2014 and December 31, 2013 (aggregate liquidation preference of $1,000,000) | 1,000,000 | 1,000,000 |
Total current liabilities | 5,695,647 | 5,244,953 |
Long term liabilities: | ' | ' |
Notes payable, net of debt discount of $19,933 as of September 30, 2014 and $269,998 as of12/31/2013 | 80,067 | 430,002 |
Long term portion of equipment lease payable | 62,578 | 109,964 |
Total long term liabilities | 142,645 | 539,966 |
Total liabilities | 5,838,292 | 5,784,919 |
Preferred stock - par value $0.001 per share; authorized 1,000,000 shares; issued and outstandingas of September 30, 2014 and December 31, 2013 as follows: | ' | ' |
Convertible preferred stock - Series A - 200,000 shares designated Series A; 44,443 shares available to be issued; no shares issued and outstanding | ' | ' |
Convertible preferred stock - Series B - 625,000 shares designated Series B; 451,879 and 422,315 shares issued and outstanding as of September 30, 2014 and December 31, 2013, respectively (aggregate liquidation preference of $4,494,445 and $4,270,257 as of September 30, 2014 and December 31, 2013, respectively) | 452 | 422 |
Common stock - par value $0.001 per share; authorized 50,000,000 shares (see Note 10) ; 36,416,262 and 27,708,303 shares issued and 35,237,050 and 26,529,091 shares outstanding as of September 30, 2014 and December 31, 2013, respectively | 36,417 | 27,708 |
Additional paid-in capital | 29,300,622 | 27,166,147 |
Employee advances | -4,286 | -9,001 |
Treasury stock, at cost, 1,179,212 shares as of September 30, 2014 and December 31, 2013 | -3,419,715 | -3,419,715 |
Accumulated deficit | -29,555,796 | -28,130,668 |
Total stockholders' deficiency | -3,642,306 | -4,365,107 |
Total liabilities and stockholders' deficiency | $2,195,986 | $1,419,812 |
CONDENSED_CONSOLIDATED_BALANCE1
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
Current assets: | ' | ' |
Allowance of accounts receivable | $50,957 | $250,828 |
Accumulated depreciation | 665,238 | 576,590 |
Accumulated amortization | 53,205 | 14,643 |
Current liabilities: | ' | ' |
Debt discount | 103,299 | ' |
Redeemable preferred stock Series C, par value | 0.001 | 0.001 |
Redeemable preferred stock Series C, shares designated | 10,000 | 10,000 |
Redeemable preferred stock Series C, shares issued | 10,000 | 10,000 |
Redeemable preferred stock Series C, shares outstanding | 10,000 | 10,000 |
Redeemable preferred stock Series C, aggregate liquidation preference | 1,000,000 | 1,000,000 |
Long term liabilities: | ' | ' |
Notes payable, debt discount | 19,933 | 269,998 |
Stockholders' deficiency: | ' | ' |
Preferred stock, par value | $0.00 | $0.00 |
Preferred stock, authorized | 1,000,000 | 1,000,000 |
Series A Convertible preferred stock, shares designated | 200,000 | 200,000 |
Series A Convertible preferred stock, shares available to be issued | 44,443 | 44,443 |
Series A Convertible preferred stock, shares issued | 0 | 0 |
Series A Convertible preferred stock, shares outstanding | 0 | 0 |
Series B Convertible preferred stock, shares designated | 625,000 | 625,000 |
Series B Convertible preferred stock, shares issued | 451,879 | 422,315 |
Series B Convertible preferred stock, shares outstanding | 451,879 | 422,315 |
Series B Convertible preferred stock, aggregate liquidation preference | $4,494,445 | $4,270,257 |
Common stock, par value | $0.00 | $0.00 |
Common stock, authorized | 50,000,000 | 50,000,000 |
Common stock, shares issued | 36,416,262 | 27,708,303 |
Common stock, shares outstanding | 35,237,050 | 26,529,091 |
Treasury stock, shares | 1,179,212 | 1,179,212 |
CONDENSED_CONSOLIDATED_STATEME
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | |
Condensed Consolidated Statements Of Operations | ' | ' | ' | ' |
Net sales | $1,474,986 | $2,399,256 | $4,654,404 | $7,483,933 |
Cost of sales | 600,840 | 1,196,303 | 1,923,142 | 3,770,579 |
Gross profit | 874,146 | 1,202,953 | 2,731,262 | 3,713,354 |
Operating expenses: | ' | ' | ' | ' |
Selling, general and administrative expenses | 1,317,775 | 2,166,749 | 3,686,421 | 6,102,298 |
Loss from operations | -443,629 | -963,796 | -955,159 | -2,388,944 |
Other income (expense): | ' | ' | ' | ' |
Loss on extinguishment of debt | ' | ' | ' | -2,792,900 |
Interest expense | -86,628 | -57,333 | -245,781 | -186,638 |
Total other expense | -86,628 | -57,333 | -245,781 | -2,979,538 |
Net loss | -530,257 | -1,021,129 | -1,200,940 | -5,368,482 |
Series B convertible contractual dividends | -74,730 | -69,840 | -224,189 | -209,520 |
Series B convertible deemed dividends | ' | ' | ' | -1,532,722 |
Loss attributable to common stockholders | ($604,987) | ($1,090,969) | ($1,425,129) | ($7,110,724) |
Per share data: | ' | ' | ' | ' |
Net loss - basic and diluted | ($0.02) | ($0.04) | ($0.04) | ($0.24) |
Series B convertible contractual dividends | $0 | $0 | ($0.01) | ($0.01) |
Series B convertible deemed dividends | ' | ' | ' | ($0.07) |
Net loss attributable to common stockholders - basic and diluted | ($0.02) | ($0.04) | ($0.05) | ($0.32) |
Weighted average number of common shares outstanding - basic and diluted | 29,949,512 | 26,101,517 | 27,694,705 | 22,347,613 |
CONDENSED_CONSOLIDATED_STATEME1
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $) | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2013 | |
Cash flows from operating activities | ' | ' | ' |
Net loss | ($1,200,940) | ($5,368,482) | ($5,489,892) |
Adjustments to reconcile net loss to net cash used in operating activities: | ' | ' | ' |
Provision for doubtful accounts | -50,036 | 45,297 | ' |
Provision for employee advance reserve | 4,715 | -13,268 | ' |
Depreciation and amortization | 127,211 | 114,874 | ' |
Stock-based compensation | 502,408 | 476,096 | ' |
Warrants issued to 2012 private placement investors | ' | 487,200 | ' |
Loss on extinguishment of notes and accounts payable | ' | 2,792,900 | ' |
Imputed value of services contributed | 116,667 | 262,500 | ' |
Amortization of debt discount | 182,766 | 125,163 | ' |
Changes in operating assets and liabilities: | ' | ' | ' |
Accounts receivable | 208,058 | -100,240 | ' |
Inventories - finished goods | 136,964 | 2,957 | ' |
Prepaid expenses and other current assets | -12,982 | -30,133 | ' |
Accounts payable - trade | -371,735 | 362,064 | ' |
Accounts payable - related parties | -35,017 | 174,321 | ' |
Accrued expenses and other current liabilities | 356,491 | -251,615 | ' |
Deferred revenue | -91,671 | 39,128 | ' |
Net cash used in operating activities | -127,101 | -881,238 | ' |
Cash flows from investing activities | ' | ' | ' |
Change in restricted cash | -650,074 | 850,002 | ' |
Website development costs | -98,001 | -68,590 | ' |
Net cash (used in) and provided by investing activities | -748,075 | 781,412 | ' |
Cash flows from financing activities | ' | ' | ' |
Principal payments on equipment leases payable | -41,269 | -36,262 | ' |
Proceeds from issuance of notes payable | 150,000 | 500,000 | ' |
Repayment of notes payable and other advances - related parties | -5,000 | -2,017,905 | ' |
Repayment of convertible notes payable | ' | -1,000,000 | ' |
Proceeds from the sale of common stock | 1,208,759 | 2,651,973 | ' |
Proceeds from notes payable and other advances - related parties | ' | 56,000 | ' |
Net cash provided by financing activities | 1,312,490 | 153,806 | ' |
Net increase in cash | 437,314 | 53,980 | ' |
Cash - beginning of period | 67,744 | ' | ' |
Cash - end of period | 505,058 | 53,980 | 67,744 |
Interest | 65,395 | 416,369 | ' |
Income Taxes | ' | 899 | ' |
Non-cash investing and financing activities: | ' | ' | ' |
Issuance of Series B preferred stock for settlement of accrued dividends | 279,380 | 261,084 | ' |
Cashless exercise of warrants into common stock | ' | 10,342 | ' |
Warrants issued as debt discount in connection with notes payable | 36,000 | 315,300 | ' |
Accrual of contractual dividends on Series B convertible preferred stock | 224,189 | 209,520 | ' |
Deemed dividends on Series B convertible preferred stock | ' | 1,532,722 | ' |
Common stock and warrants issued in exchange of notes and accounts payable | ' | 3,625,900 | ' |
Conversion of accounts payable to notes payable | ' | $40,000 | ' |
Organization_and_Basis_of_Pres
Organization and Basis of Presentation | 9 Months Ended |
Sep. 30, 2014 | |
Organization And Basis Of Presentation | ' |
1 - Organization and Basis of Presentation | ' |
HealthWarehouse.com, Inc., a Delaware company incorporated in 1998, (the “Company”) is a U.S. licensed virtual retail pharmacy (“VRP”) and healthcare e-commerce company that sells brand name and generic prescription drugs as well as over-the-counter (“OTC”) medical products. The Company’s objective is to be viewed by individual healthcare product consumers as a low-cost, reliable and hassle-free provider of prescription drugs and OTC medical products. The Company is presently licensed as a mail-order pharmacy in 50 states in the United States and the District of Columbia. | |
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the information and disclosures required by U.S. GAAP for annual financial statements. In the opinion of management, such statements include all adjustments (consisting only of normal recurring items) which are considered necessary for a fair presentation of the condensed consolidated financial statements of the Company as of September 30, 2014 and for the three and nine months ended September 30, 2014 and 2013. The results of operations for the three and nine months ended September 30, 2014 are not necessarily indicative of the operating results for the full year ending December 31, 2014 or any other period. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related disclosures of the Company as of December 31, 2013 and for the year then ended, which were filed with the Securities and Exchange Commission on Form 10-K on April 15, 2014. |
Going_Concern_and_Managements_
Going Concern and Management's Liquidity Plans | 9 Months Ended |
Sep. 30, 2014 | |
Going Concern And Managements Liquidity Plans | ' |
2 - Going Concern and Management's Liquidity Plans | ' |
Since inception, the Company has financed its operations primarily through debt and equity financings and advances from related parties. As of September 30, 2014, the Company had a working capital deficiency of $4,178,865 and an accumulated deficit of $29,555,796. During the nine months ended September 30, 2014 and the year ended December 31, 2013, the Company incurred net losses of $1,200,940 and $5,489,892, respectively and used cash in operating activities of $127,101 and $1,024,781, respectively. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. | |
Subsequent to September 30, 2014, the Company (a) completed the second phase of its private placement offering for an aggregate of $350,000 of gross proceeds and (b) continues to incur net losses and use cash in operating activities. The funds from the private placement offering have improved the Company’s the current cash and working capital constraints; however, the funds are not sufficient to satisfy its current obligations. | |
On February 13, 2013, the Company received a Notice of Redemption related to its Series C Redeemable Preferred Stock aggregating $1,000,000 (see Note 6). As a result of receiving the Notice of Redemption, the Company must now apply all of its assets to redemption of the Series C Preferred Stock and to no other corporate purpose, except to the extent prohibited by Delaware law governing distributions to stockholders (the Company is not permitted to utilize toward the redemption those assets required to pay its debts as they come due and those assets required to continue as a going concern). | |
The Company recognizes it will need to raise additional capital in order to meet its payment obligations, including the terms of its Loan and Security Agreement (see Note 5), and execute its business plan. There is no assurance that additional financing will be available when needed or that management will be able to obtain financing on terms acceptable to the Company and whether the Company will become profitable and generate positive operating cash flow. If the Company is unable to raise sufficient additional funds, it will have to develop and implement a plan to further extend payables, attempt to extend note repayments, attempt to negotiate the preferred stock redemption and reduce overhead until sufficient additional capital is raised to support further operations. There can be no assurance that such a plan will be successful. If the Company is unable to obtain financing on a timely basis, the Company could be forced to sell its assets, discontinue its operation and /or seek reorganization under the U.S. bankruptcy code. | |
Accordingly, the accompanying condensed consolidated financial statements have been prepared in conformity with U.S. GAAP, which contemplates continuation of the Company as a going concern and the realization of assets and the satisfaction of liabilities in the normal course of business. The carrying amounts of assets and liabilities presented in the condensed consolidated financial statements do not necessarily represent realizable or settlement values. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. |
Summary_of_Significant_Account
Summary of Significant Accounting Policies | 9 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Summary Of Significant Accounting Policies | ' | ||||||||
3 - Summary of Significant Accounting Policies | ' | ||||||||
Principles of Consolidation | |||||||||
The condensed consolidated financial statements include the accounts of HealthWarehouse.com, Inc., Hwareh.com, Inc., Hocks.com, Inc., ION Holding NV, ION Belgium NV and Pagosa, its wholly-owned subsidiaries. ION Holding NV and ION Belgium NV are inactive subsidiaries. All material inter-company balances and transactions have been eliminated in consolidation. | |||||||||
On June 4, 2013, the Company formed a wholly-owned subsidiary called Pagosa Health LLC (“Pagosa”). On January 14, 2014, the Company closed Pagosa and decided to focus on its core consumer prescription business. See Note 7. | |||||||||
Use of Estimates | |||||||||
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company’s significant estimates include reserves related to accounts receivable and inventory, the recoverability and useful lives of long-lived assets, the valuation allowance related to deferred tax assets and the valuation of equity instruments and debt discounts. | |||||||||
Net Loss Per Share of Common Stock | |||||||||
Basic net loss per share is computed by dividing net loss attributable to Common Stockholders by the weighted average number of common shares outstanding during the period. Diluted net loss per share reflects the potential dilution that could occur if securities or other instruments to issue Common Stock were exercised or converted into Common Stock. Potentially dilutive securities are excluded from the computation of diluted net loss per share if their inclusion would be anti-dilutive and consist of the following: | |||||||||
September 30, | |||||||||
2014 | 2013 | ||||||||
Options | 2,601,700 | 2,188,650 | |||||||
Warrants | 8,032,378 | 2,192,846 | |||||||
Series B Convertible Preferred Stock | 4,844,143 | 3,438,275 | |||||||
Total potentially dilutive shares | 15,478,221 | 7,819,771 | |||||||
Recently Issued Accounting Pronouncements | |||||||||
In August 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-15, “Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entitiy’s Ability to Continue as a Going Concern” (“ASU 2014-15”). ASU 2014-15 requires management to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern for each annual and interim reporting period. If substantial doubt exists, additional disclosure is required. This new standard will be effective for the Company for annual and interim periods beginning after December 15, 2016. Early adoption is permitted. Adoption of this pronouncement is not expected to have a material impact on its condensed consolidated financial statements. | |||||||||
The FASB has issued ASU No. 2014-12, Compensation - Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. This ASU requires that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant date fair value of the award. This update further clarifies that compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered.. The amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. The Company has not yet determined the effect of the adoption of this standard and its impact on the Company's condensed consolidated financial position and results of operations. | |||||||||
The FASB has issued ASU No. 2014-09, Revenue from Contracts with Customers. This ASU supercedes the revenue recognition requirements in Accounting Standards Codification 605 - Revenue Recognition and most industry-specific guidance throughout the Codification. The standard requires that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. This ASU is effective on January 1, 2017 and should be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the ASU recognized at the date of initial application. The Company has not yet determined the effect of the adoption of this standard and its impact on the Company's condensed consolidated financial position and results of operations. |
Accrued_Expenses_and_Other_Cur
Accrued Expenses and Other Current Liabilities | 9 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Accrued Expenses And Other Current Liabilities | ' | ||||||||
4 - Accrued Expenses and Other Current Liabilities | ' | ||||||||
Accrued expenses and other current liabilities consisted of the following: | |||||||||
September 30, | December 31, | ||||||||
2014 | 2013 | ||||||||
Deferred Rent | $ | 38,603 | $ | 46,254 | |||||
Advertising | 75,000 | 75,000 | |||||||
Salaries and Benefits | 120,817 | 132,048 | |||||||
Customer Payables | 456 | 39,618 | |||||||
Dividend Payable | 224,188 | 279,380 | |||||||
Shares issuable | 350,080 | - | |||||||
Accrued Interest | 48,055 | 45,616 | |||||||
Accrued Rent | 46,604 | - | |||||||
Other | 18,549 | 3,136 | |||||||
Total | $ | 922,352 | $ | 621,052 | |||||
Notes_Payable
Notes Payable | 9 Months Ended |
Sep. 30, 2014 | |
Notes Payable | ' |
5 - Notes Payable | ' |
The Company is a party to a Loan and Security Agreement (the “Loan Agreement”) with a lender (the "Lender"). Under the terms of the Loan Agreement, the Company borrowed an aggregate of $750,000 from the Lender (the “Loan”), including $150,000 during the nine months ended September 30, 2014. The Loan is evidenced by a promissory note (the “Note”) in the face amount of $750,000 (as amended). The Note bears interest on the unpaid principal balance of the Note until the full amount of principal has been paid at a floating rate equal to the Prime Rate plus four and one-quarter percent (4.25%) per annum (7.50% as of September 30, 2014). Under the terms of the Loan Agreement, the Company has agreed to make monthly payments of accrued interest on the first day of every month. The principal amount and all unpaid accrued interest on the Note is payable on March 1, 2015, or earlier in the event of default or a sale or liquidation of the Company. The Loan may be prepaid in whole or in part at any time by the Company without penalty. The Note contains financial covenants which require the Company to meet certain minimum targets for earnings before interest, taxes and non-cash expenses, including depreciation, amortization and stock-based compensation (“EBITDAS”). | |
In connection with the Loan Agreement, the Company granted the Lender five-year warrants to purchase an aggregate of 1,125,000 shares of Common Stock at an exercise price of $0.35 per share, of which 225,000 warrants were issued during the nine months ended September 30, 2014. The warrants contain customary anti-dilution provisions. The warrants had an aggregate relative fair value of $402,500, of which $36,000 was established as debt discount during the nine months ended September 30, 2014 and will be amortized using the effective interest method over the term of the Note. Including the value of warrants issued in connection with Note and subsequent amendments, the Note had an effective interest rate of 40% per annum. | |
The Company granted the Lender a first, priority security interest in all of the Company’s assets, in order to secure the Company’s obligation to repay the Loan, including a Deposit Account Control Agreement, which grants the Lender a security interest in certain bank accounts. The Loan Agreement contains customary negative covenants restricting the Company’s ability to take certain actions without the Lender’s consent, including incurring additional indebtedness, transferring or encumbering assets, paying dividends or making certain other payments, and acquiring other businesses. Upon the occurrence of an event of default, the Lender has the right to impose interest at a rate equal to five percent (5.0%) per annum above the otherwise applicable interest rate (the “Default Rate”). The repayment of the Loan may be accelerated prior to the maturity date upon certain specified events of default, including failure to pay, bankruptcy, breach of covenant, and breach of representations and warranties. | |
The Company recorded amortization of debt discount associated with notes payable of $64,865 and $182,766 for the three and nine months ended September 30, 2014, respectively, and $40,400 and $125,163 for the three and nine months ended September 30, 2013, respectively. |
Stockholders_Deficiency
Stockholders' Deficiency | 9 Months Ended | ||||||||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||||||||
Stockholders Deficiency | ' | ||||||||||||||||||||||
6 - Stockholders' Deficiency | ' | ||||||||||||||||||||||
Common Stock | |||||||||||||||||||||||
On January 15, 2014, the Company issued 21,289 shares of Common Stock to an employee in accordance with an employment agreement. The fair value of the shares was $10,646 based on the closing price on the date of issuance which was recorded as stock based compensation expense during the nine months ended September 30, 2014. | |||||||||||||||||||||||
During the three and nine months ended September 30, 2014, pursuant to a private placement offering of units that commenced on July 25, 2014 (the “Private Placement”), the Company received an aggregate of $1,303,000 of gross proceeds (net of expenses of $94,241) related to the sale of 8,686,670 units at a price of $0.15 per unit. Each unit consists of (i) one share of the Company’s common stock and (ii) a five-year warrant to purchase one-half share of the Company’s common stock at an exercise price of $0.30 per share, such that warrants to purchase an aggregate of 4,343,332 shares of common stock were issued. The aggregate fair value of the warrants as of the issuance date was $961,133. The Company evaluated these warrants to assess their proper classification using the applicable criteria enumerated by U.S. GAAP and determined that such warrants met the criteria for equity classification. Proceeds from the sale of the units are to be used to fund the Company’s initiatives in the areas of marketing, and website improvement and development, inventory and for general working capital purposes. | |||||||||||||||||||||||
During the three months ended September 30, 2014, the Company granted certain options and warrants which, upon settlement, may have exceeded the limit on the authorized number of shares of common stock. The Company follows a sequencing policy for which in the event partial reclassification of contracts subject to ASC 815-40-25 is necessary, due to the Company’s inability to demonstrate it has sufficient authorized shares, shares will be allocated on the basis of earliest issuance date of potentially dilutive instruments with the earliest grants receiving first allocation of shares. The Company evaluated such instruments as of September 30, 2014 and determined that the fair value of such instruments at the date of issuance and the change in fair value as of September 30, 2014 was determined to have a de minimus impact on the Company’s condensed consolidated financial statements. Subsequent to September 30, 2014, the Company obtained stockholder approval to increase the number of authorized shares of common stock of the Company from 50,000,000 to 100,000,000. See Note 10. | |||||||||||||||||||||||
Preferred Stock | |||||||||||||||||||||||
As of September 30, 2014 and December 31, 2013, the Company had accrued contractual dividends of $224,189 and $279,380, respectively, related to the Series B convertible preferred stock. On January 1, 2014 and 2013, the Company issued 29,564 and 27,630 shares of Series B convertible preferred stock valued at $279,380 and $261,084, respectively, representing approximately $0.66 in value per share of Series B Preferred Stock outstanding on each date, to the Series B convertible preferred stock owners as payment in kind for dividends. | |||||||||||||||||||||||
As of December 31, 2013 and August 25, 2014, Series B holders were entitled to convert into 8.22 and 10.72 shares, respectively, of the Company’s common stock for each share of Series B Preferred Stock due to the anti-dilution provision. The anti-dilution provision represents a contingent beneficial conversion feature. As of September 30, 2014, an incremental 2,584,748 shares of common stock are issuable at conversion of the Series B Convertible Preferred Stock as compared to the original terms. Using the commitment date common stock price in effect, the commitment date value of the incremental shares is $6,524,652. However, recognition of beneficial conversion features is limited to the aggregate gross proceeds allocated to the preferred stock of $3,479,068 (451,879 shares of Series B Convertible Preferred Stock times $9.45 per share less the proceeds allocated to the warrants of $791,188) less the $3,199,689 beneficial conversion feature previously recognized. Due to these limitations, no beneficial conversion feature related to the incremental shares was recognized during the three and nine months ended September 30, 2014. | |||||||||||||||||||||||
Stock Options | |||||||||||||||||||||||
Valuation | |||||||||||||||||||||||
In applying the Black-Scholes option pricing model to stock options, the Company used the following weighted average assumptions: | |||||||||||||||||||||||
For The Three Months Ended | For The Nine Months Ended | ||||||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||||||||
Risk free interest rate | 0.97% to 1.75% | n/a | 0.97% to 1.75% | 1.13% to 1.50% | |||||||||||||||||||
Dividend yield | 0.00% | n/a | 0.00% | 0.00% | |||||||||||||||||||
Expected volatility | 190.00% | n/a | 190.00% | 166.0% to 175.0% | |||||||||||||||||||
Expected life in years | 3.0 to 5.5 | n/a | 3.0 to 5.5 | 6 | |||||||||||||||||||
Grants | |||||||||||||||||||||||
The weighted average fair value of the stock options granted during the nine months ended September 30, 2014 and 2013 was $0.17 and $1.17 per share, respectively. The weighted average fair value of the stock options granted during the three months ended September 30, 2014 was $0.17 per share. There were no stock options granted during the three months ended September 30, 2013. | |||||||||||||||||||||||
On August 27, 2014, the Company granted options to directors of the Company to purchase an aggregate of 345,000 shares of common stock under the 2009 Plan at an exercise price of $0.16 per share for an aggregate grant date value of $53,838. The options vest on November 30, 2014 and have a term of ten years. | |||||||||||||||||||||||
On August 27, 2014, the Company also granted options to an Officer of the Company to purchase an aggregate of 250,000 shares of common stock under the 2009 Plan at an exercise price of $0.18 per share for an aggregate grant date value of $35,825. The options vest over a one year period and have a term of five years. | |||||||||||||||||||||||
Stock-based compensation expense related to stock options was recorded in the condensed consolidated statements of operations as a component of selling, general and administrative expenses and totaled $99,940 and $358,144 for the three and nine months ended September 30, 2014, respectively, and $143,113 and $469,356 for the three and nine months ended September 30, 2013, respectively. | |||||||||||||||||||||||
As of September 30, 2014, stock-based compensation expense related to stock options of $1,259,673 remains unamortized, including $368,104 which is being amortized over the weighted average remaining period of 1.1 years. The remaining $891,569 is related to a performance based option where vesting is currently deemed to be improbable and no amount is being amortized. | |||||||||||||||||||||||
Summary | |||||||||||||||||||||||
A summary of the stock option activity during the nine months ended September 30, 2014 is presented below: | |||||||||||||||||||||||
Weighted | |||||||||||||||||||||||
Weighted | Average | ||||||||||||||||||||||
Average | Remaining | Aggregate | |||||||||||||||||||||
Number of | Exercise | Life | Intrinsic | ||||||||||||||||||||
Options | Price | In Years | Value | ||||||||||||||||||||
Outstanding, January 1, 2014 | 2,543,150 | $ | 2.37 | ||||||||||||||||||||
Granted | 595,000 | 0.17 | |||||||||||||||||||||
Exercised | - | - | |||||||||||||||||||||
Forfeited | (536,450 | ) | 2.37 | ||||||||||||||||||||
Outstanding, September 30, 2014 | 2,601,700 | $ | 1.86 | 6.5 | $ | - | |||||||||||||||||
Exercisable, September 30, 2014 | 1,002,689 | $ | 3.07 | 5.1 | $ | - | |||||||||||||||||
The following table presents information related to stock options at September 30, 2014: | |||||||||||||||||||||||
Options Outstanding | Options Exercisable | ||||||||||||||||||||||
Weighted | Weighted | Weighted | |||||||||||||||||||||
Range of | Average | Outstanding | Average | Average | Exercisable | ||||||||||||||||||
Exercise | Exercise | Number of | Exercise | Remaining Life | Number of | ||||||||||||||||||
Price | Price | Options | Price | In Years | Options | ||||||||||||||||||
$ | 0.16 - $2.20 | $ | 0.56 | 1,527,950 | $ | 1.18 | 6.6 | 212,939 | |||||||||||||||
$ | 2.21 - $3.80 | 3.23 | 757,750 | 2.95 | 3.3 | 507,750 | |||||||||||||||||
$ | 3.81 - $6.99 | 4.88 | 316,000 | 4.72 | 7.2 | 282,000 | |||||||||||||||||
$ | 1.86 | 2,601,700 | $ | 3.07 | 5.1 | 1,002,689 | |||||||||||||||||
Warrants | |||||||||||||||||||||||
Valuation | |||||||||||||||||||||||
In applying the Black-Scholes option pricing model to stock warrants, the Company used the following weighted average assumptions: | |||||||||||||||||||||||
For The Three Months Ended | For The Nine Months Ended | ||||||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||||||||
Risk free interest rate | 1.69% to 2.32% | n/a | 1.69% to 2.52% | 0.87% | |||||||||||||||||||
Dividend yield | 0.00% | n/a | 0.00% | 0.00% | |||||||||||||||||||
Expected volatility | 189% to 190% | n/a | 171.0% to 190.0% | 164.30% | |||||||||||||||||||
Expected life in years | 5 | n/a | 5 | 5 | |||||||||||||||||||
Grants | |||||||||||||||||||||||
The weighted average fair value of the stock warrants granted during the nine months ended September 30, 2014 and 2013, was $0.23 and $1.36 per share, respectively. The weighted average fair value of the stock warrants granted during the three months ended September 30, 2014 was $0.22. | |||||||||||||||||||||||
On August 25, 2014, the Company granted vested five-year warrants to purchase an aggregate of 521,200 shares of common stock at an exercise price of $0.15 per share to a consultant related to the completion of the Private Placement. The warrants had an issuance date fair value of $116,681 which was charged to Additional Paid in Capital since they were directly related to the Private Placement. | |||||||||||||||||||||||
On August 25, 2014, the Company granted vested five-year warrants to purchase an aggregate of 600,000 shares of common stock at an exercise price of $0.25 per share to a consultant. The warrants had an issuance date fair value of $133,225 which was expensed immediately. | |||||||||||||||||||||||
Aggregate stock-based compensation expense related to warrants for the three and nine months ended September 30, 2014 was recorded in the condensed consolidated statements of operations as a component of selling, general and administrative expenses and totaled $134,205 and $133,618, respectively, and $20,424 and $493,940 for the three and nine months ended September 30, 2013, respectively. As of September 30, 2014, stock-based compensation expense related to warrants of $578,762 remains unamortized, including $1,922 which is being amortized over the weighted average remaining period of 1.0 years. The remaining grant date value of $576,840 is related to a performance based warrant where vesting is currently deemed to be improbable and no amount is being amortized. | |||||||||||||||||||||||
A summary of the stock warrant activity during the nine months ended September 30, 2014 is presented below: | |||||||||||||||||||||||
Weighted | |||||||||||||||||||||||
Weighted | Average | ||||||||||||||||||||||
Average | Remaining | Aggregate | |||||||||||||||||||||
Number of | Exercise | Life | Intrinsic | ||||||||||||||||||||
Warrants | Price | In Years | Value | ||||||||||||||||||||
Outstanding, January 1, 2014 | 2,342,846 | $ | 0.96 | ||||||||||||||||||||
Granted | 5,689,532 | 0.28 | |||||||||||||||||||||
Exercised | - | - | |||||||||||||||||||||
Forfeited | - | - | |||||||||||||||||||||
Outstanding, September 30, 2014 | 8,032,378 | $ | 0.48 | 4.5 | $ | 20,848 | |||||||||||||||||
Exercisable, September 30, 2014 | 7,782,378 | $ | 0.4 | 4.5 | $ | 20,848 | |||||||||||||||||
The following table presents information related to stock warrants at September 30, 2014: | |||||||||||||||||||||||
Warrants Outstanding | Warrants Exercisable | ||||||||||||||||||||||
Weighted | Weighted | Weighted | |||||||||||||||||||||
Range of | Average | Outstanding | Average | Average | Exercisable | ||||||||||||||||||
Exercise | Exercise | Number of | Exercise | Remaining Life | Number of | ||||||||||||||||||
Price | Price | Warrants | Price | In Years | Warrants | ||||||||||||||||||
$ | 0.15 - $0.35 | $ | 0.28 | 7,439,532 | $ | 0.28 | 4.7 | 7,439,532 | |||||||||||||||
$ | 0.36 - $3.00 | 2.91 | 562,846 | 2.91 | 2 | 312,846 | |||||||||||||||||
$ | 3.01 - $4.95 | 4.95 | 30,000 | 4.95 | 3.1 | 30,000 | |||||||||||||||||
$ | 0.15 - $4.95 | $ | 0.48 | 8,032,378 | $ | 0.4 | 4.5 | 7,782,378 | |||||||||||||||
Services Contributed | |||||||||||||||||||||||
Effective January 1, 2013 through April 30, 2014, an executive officer of the Company waived payment for services contributed. As a result, the Company imputed the value of the services contributed based on a compensation rate previously approved by the Compensation Committee and recorded salary expense of $116,667 for the nine months ended September 30, 2014, with a corresponding credit to stockholders’ deficiency. On April 28, 2014, the Compensation Committee approved the payment of an annual salary of $150,000 to the Company’s Chief Executive Officer, effective May 1, 2014. |
Commitments_and_Contingent_Lia
Commitments and Contingent Liabilities | 9 Months Ended | ||||
Sep. 30, 2014 | |||||
Commitments And Contingent Liabilities | ' | ||||
7 - Commitments and Contingent Liabilities | ' | ||||
Operating Leases | |||||
The Company is a party to a lease agreement for approximately 62,000 square feet of office and storage space with an entity. The monthly lease rate is $10,671 for years 2014 and 2015 and $11,975 in year 2016. The Company accounts for rent expense using the straight line method of accounting, deferring the difference between actual rent due and the straight line amount. The lease expires on January 1, 2017. Deferred rent payable of $38,603 and $46,254 as of September 30, 2014 and December 31, 2013, respectively, has been included in accrued expenses and other current liabilities on the condensed consolidated balance sheets. | |||||
On June 7, 2013, Pagosa signed a three year lease for $1,000 per month to house an office, pharmacy as well as inventory and is located in Lawrenceburg, IN. On July 8, 2013, the parties agreed to extend the lease for two additional years, such that the new termination date is now June 7, 2018. On January 14, 2014, the Company closed Pagosa Health and vacated the Lawrenceburg facility. The Company is currently in discussions with the Landlord regarding termination of the lease related to the building. The present value of the remaining lease payments of $46,604 was expensed during the nine months ended September 30, 2014, and is reflected as a component of accrued expenses and other liabilities on the condensed consolidated balance sheet as of September 30, 2014. | |||||
Future minimum payments, by year and in the aggregate, under operating leases as of September 30, 2014 are as follows: | |||||
For years ending December 31, | Amount | ||||
2014 | $ | 35,013 | |||
2015 | 140,052 | ||||
2016 | 155,700 | ||||
2017 | 12,000 | ||||
2018 | 5,000 | ||||
Total future minimum lease payments | $ | 347,765 | |||
During the three and nine months ended September 30, 2014, the Company recorded aggregate rent expense of $66,820 and $210,140, respectively, and $47,921 and $141,257 during the three and nine months ended September 30, 2013, respectively. | |||||
Shares Issuable | |||||
As of September 30, 2014, the Company held funds of $350,080 in escrow related to the second phase of a private offering. Upon the closing of the second phase on October 23, 2014, the Company issued 2,333,333 shares of common stock and 1,166,666 warrants to purchase additional shares of common stock to the new investors and the funds were released from escrow. See Note 10. | |||||
Litigation | |||||
In the ordinary course of business, the Company may become subject to lawsuits and other claims and proceedings that might arise from litigation matters or regulatory audits. Such matters are subject to uncertainty and outcomes are often not predictable with assurance. The Company’s management does not presently expect that any such matters will have a material adverse effect on the Company’s condensed consolidated financial condition or condensed consolidated results of operations. The Company is not currently involved in any pending or threatened material litigation or other material legal proceedings nor has the Company been made aware of any penalties from regulatory audits, except as described below. | |||||
On February 9, 2012, two of our former stockholders, Rock Castle Holdings, LLC and Jason Smith (collectively “Plaintiffs”), filed suit against us in the Hamilton County, Ohio Court of Common Pleas, alleging that the Company had breached the terms of certain incentive options the Company granted to the Plaintiffs in connection with our now-terminated oral consulting arrangements with the Plaintiffs, by among other things, refusing Plaintiffs’ purported exercise of options to purchase 233,332 shares of our Common Stock at an exercise price of $2.00 per share in December 2011. Plaintiffs have requested that, among other things, the court require us to permit the exercise of the 233,332 options. Plaintiffs have also provided an expert report indicating damages of $2.086 million. Also named as defendants were two individuals, Michael Peppel and Gary Singer, whom Plaintiffs claim acted as agents for us in connection with our purchase of shares of our Common Stock from Plaintiffs in September 2011. On July 19, 2012, the Company and Mr. Peppel filed an answer and counterclaim for breach of contract, alleging that Plaintiffs breached consulting agreements with the Company and undertook a series of actions that damaged and hurt the Company. On July 24, 2012, the Company filed a complaint against Dennis Smith for breach of contract in the Hamilton County, Ohio Court of Common Pleas, which action was consolidated with the earlier case. Plaintiffs filed an answer in response to the counterclaim, and Dennis Smith filed an answer in response to the Company’s complaint. On April 26, 2013, Plaintiffs dismissed Mr. Singer from the lawsuit. On March 24, 2014, all parties filed motions for summary judgment: (i) the Company and Mr. Peppel moved for summary judgment on all claims asserted by Plaintiffs, (ii) Dennis B. Smith and Counterclaim Defendants and Plaintiffs moved for summary judgment on the Company’s claims for breach of contract, and (iii) Plaintiffs moved for partial summary judgment on their claim for declaratory relief that the Company breached the terms of a stock option agreement. Trial of the case is currently scheduled to begin the week of November 17, 2014. The Company denies all of the Plaintiffs’ claims and intend to contest this matter vigorously. | |||||
The Company was a party to a putative stockholder derivative action that was filed in the Court of Chancery of the State of Delaware on May 7, 2013 against certain directors and our chief executive officer and against us, as a nominal defendant. On January 8, 2014, in a stipulation and order of dismissal, the action was dismissed with prejudice to plaintiff, with each party bearing its own attorneys' fees and costs. | |||||
On May 15, 2013, a former consultant filed suit in Boone County, Kentucky Circuit Court alleging breach of contract and unjust enrichment for unpaid consulting fees and expenses of approximately $55,000. On September 29, 2014, the Company executed a settlement agreement with the former consultant for $25,000 which is payable in monthly installments through March 1, 2015. |
Concentrations
Concentrations | 9 Months Ended |
Sep. 30, 2014 | |
Concentrations | ' |
8 - Concentrations | ' |
During the three months ended September 30, 2014, two vendors represented 76% and 12% of total inventory purchases, and 68% and 14% of total inventory purchases for the nine months ended September 30, 2014. During the three months ended September 30, 2013, two vendors represented 63% and 12% of total inventory purchases, and 60% and 15% of total inventory purchases for the nine months ended September 30, 2013. One vendor represented 30% and 24% of the accounts payable balance as of September 30, 2014 and 2013, respectively. |
Related_Party_Transactions
Related Party Transactions | 9 Months Ended |
Sep. 30, 2014 | |
Related Party Transactions | ' |
9 - Related Party Transactions | ' |
Between June 2009 and April 2012, an employee who is the son of the managing member of a limited liability company that beneficially owns over 5% of the Company’s Common Stock received advances from the Company in various forms which totaled $391,469 including interest. Principal repayments towards the outstanding advances aggregating $235,000 have been made through September 30, 2014. In April 2012, this employee voluntarily resigned from the Company. The individual agreed to repay the remaining balance with interest based on prime rate on the first business day of the calendar quarter. The amount has been included in Stockholders’ Deficiency as the Company has determined to exercise its rights through a pledge agreement for 42,860 shares as collateral. At September 30, 2014 and December 31, 2013, the Company estimated the value of the collateral at $4,286 and $9,001, respectively. |
Subsequent_Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2014 | |
Subsequent Events | ' |
10 - Subsequent Events | ' |
The Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued. Based upon the evaluation, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the condensed consolidated financial statements, except as disclosed. | |
On October 23, 2014, the Company sold 2,333,333 shares of common stock, par value $0.001 per share, in the second phase of a private offering at $0.15 per share for $350,000 in gross proceeds (net of expenses of $20,925). The initial phase of the private offering closed on August 21, 2014 (see Note 6). Warrants to purchase 1,166,666 shares of common stock at $0.30 per share were issued to the purchasers in this phase of the private offering. The warrants expire five years from the date of issuance. The Company realized an aggregate of $1,653,000 in gross proceeds (net of expenses of $115,166) from the offering. A total of 11,020,003 shares and 5,509,998 warrants were issued in the private offering. | |
Following the approval of the Board of Directors and stockholders of record as of August 25, 2014, the Company filed a Certificate of Amendment with the Secretary of State of Delaware on October 17, 2014, which increased the number of authorized shares of common stock of the Company from 50,000,000 to 100,000,000. | |
Following the approval of the Board of Directors and stockholders of record as of August 25, 2014, the Company adopted the 2014 Equity Incentive Plan which made a total of 6,000,000 shares of common stock authorized and available for issuance pursuant to awards granted under the 2014 Equity Plan. | |
On October 23, 2014, the Company granted options to directors of the Company to purchase an aggregate of 1,342,857 shares of common stock under the 2014 Plan at an exercise price of $0.12 per share for an aggregate grant date value of $154,455. The options vest immediately and have a term of ten years. |
Summary_of_Significant_Account1
Summary of Significant Accounting Policies (Policies) | 9 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Summary Of Significant Accounting Policies Policies | ' | ||||||||
Principles of Consolidation | ' | ||||||||
The condensed consolidated financial statements include the accounts of HealthWarehouse.com, Inc., Hwareh.com, Inc., Hocks.com, Inc., ION Holding NV, ION Belgium NV and Pagosa, its wholly-owned subsidiaries. ION Holding NV and ION Belgium NV are inactive subsidiaries. All material inter-company balances and transactions have been eliminated in consolidation. | |||||||||
On June 4, 2013, the Company formed a wholly-owned subsidiary called Pagosa Health LLC (“Pagosa”). On January 14, 2014, the Company closed Pagosa and decided to focus on its core consumer prescription business. See Note 7. | |||||||||
Use of Estimates | ' | ||||||||
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company’s significant estimates include reserves related to accounts receivable and inventory, the recoverability and useful lives of long-lived assets, the valuation allowance related to deferred tax assets and the valuation of equity instruments and debt discounts. | |||||||||
Net Loss Per Share of Common Stock | ' | ||||||||
Basic net loss per share is computed by dividing net loss attributable to Common Stockholders by the weighted average number of common shares outstanding during the period. Diluted net loss per share reflects the potential dilution that could occur if securities or other instruments to issue Common Stock were exercised or converted into Common Stock. Potentially dilutive securities are excluded from the computation of diluted net loss per share if their inclusion would be anti-dilutive and consist of the following: | |||||||||
September 30, | |||||||||
2014 | 2013 | ||||||||
Options | 2,601,700 | 2,188,650 | |||||||
Warrants | 8,032,378 | 2,192,846 | |||||||
Series B Convertible Preferred Stock | 4,844,143 | 3,438,275 | |||||||
Total potentially dilutive shares | 15,478,221 | 7,819,771 | |||||||
Recently Issued Accounting Pronouncements | ' | ||||||||
In August 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-15, “Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entitiy’s Ability to Continue as a Going Concern” (“ASU 2014-15”). ASU 2014-15 requires management to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern for each annual and interim reporting period. If substantial doubt exists, additional disclosure is required. This new standard will be effective for the Company for annual and interim periods beginning after December 15, 2016. Early adoption is permitted. Adoption of this pronouncement is not expected to have a material impact on its condensed consolidated financial statements. | |||||||||
The FASB has issued ASU No. 2014-12, Compensation - Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. This ASU requires that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant date fair value of the award. This update further clarifies that compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered.. The amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. The Company has not yet determined the effect of the adoption of this standard and its impact on the Company's condensed consolidated financial position and results of operations. | |||||||||
The FASB has issued ASU No. 2014-09, Revenue from Contracts with Customers. This ASU supercedes the revenue recognition requirements in Accounting Standards Codification 605 - Revenue Recognition and most industry-specific guidance throughout the Codification. The standard requires that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. This ASU is effective on January 1, 2017 and should be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the ASU recognized at the date of initial application. The Company has not yet determined the effect of the adoption of this standard and its impact on the Company's condensed consolidated financial position and results of operations. |
Summary_of_Significant_Account2
Summary of Significant Accounting Policies (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Summary Of Significant Accounting Policies Tables | ' | ||||||||
Schedule of Potentially Dilutive Securities | ' | ||||||||
Potentially dilutive securities are excluded from the computation of diluted net loss per share if their inclusion would be anti-dilutive and consist of the following: | |||||||||
September 30, | |||||||||
2014 | 2013 | ||||||||
Options | 2,601,700 | 2,188,650 | |||||||
Warrants | 8,032,378 | 2,192,846 | |||||||
Series B Convertible Preferred Stock | 4,844,143 | 3,438,275 | |||||||
Total potentially dilutive shares | 15,478,221 | 7,819,771 |
Accrued_Expenses_and_Other_Cur1
Accrued Expenses and Other Current Liabilities (Tables) | 9 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Accrued Expenses And Other Current Liabilities Tables | ' | ||||||||
Accrued expenses and other current liabilities | ' | ||||||||
Accrued expenses and other current liabilities consisted of the following: | |||||||||
September 30, | December 31, | ||||||||
2014 | 2013 | ||||||||
Deferred Rent | $ | 38,603 | $ | 46,254 | |||||
Advertising | 75,000 | 75,000 | |||||||
Salaries and Benefits | 120,817 | 132,048 | |||||||
Customer Payables | 456 | 39,618 | |||||||
Dividend Payable | 224,188 | 279,380 | |||||||
Shares issuable | 350,080 | - | |||||||
Accrued Interest | 48,055 | 45,616 | |||||||
Accrued Rent | 46,604 | - | |||||||
Other | 18,549 | 3,136 | |||||||
Total | $ | 922,352 | $ | 621,052 | |||||
Stockholders_Deficiency_Tables
Stockholders' Deficiency (Tables) | 9 Months Ended | ||||||||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||||||||
Stockholders Deficiency Tables | ' | ||||||||||||||||||||||
Schedule of Stock Option | ' | ||||||||||||||||||||||
In applying the Black-Scholes option pricing model to stock options, the Company used the following weighted average assumptions: | |||||||||||||||||||||||
For The Three Months Ended | For The Nine Months Ended | ||||||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||||||||
Risk free interest rate | 0.97% to 1.75% | n/a | 0.97% to 1.75% | 1.13% to 1.50% | |||||||||||||||||||
Dividend yield | 0.00% | n/a | 0.00% | 0.00% | |||||||||||||||||||
Expected volatility | 190.00% | n/a | 190.00% | 166.0% to 175.0% | |||||||||||||||||||
Expected life in years | 3.0 to 5.5 | n/a | 3.0 to 5.5 | 6 | |||||||||||||||||||
Summary of Stock Option Activity | ' | ||||||||||||||||||||||
A summary of the stock option activity during the nine months ended September 30, 2014 is presented below: | |||||||||||||||||||||||
Weighted | |||||||||||||||||||||||
Weighted | Average | ||||||||||||||||||||||
Average | Remaining | Aggregate | |||||||||||||||||||||
Number of | Exercise | Life | Intrinsic | ||||||||||||||||||||
Options | Price | In Years | Value | ||||||||||||||||||||
Outstanding, January 1, 2014 | 2,543,150 | $ | 2.37 | ||||||||||||||||||||
Granted | 595,000 | 0.17 | |||||||||||||||||||||
Exercised | - | - | |||||||||||||||||||||
Forfeited | (536,450 | ) | 2.37 | ||||||||||||||||||||
Outstanding, September 30, 2014 | 2,601,700 | $ | 1.86 | 6.5 | $ | - | |||||||||||||||||
Exercisable, September 30, 2014 | 1,002,689 | $ | 3.07 | 5.1 | $ | - | |||||||||||||||||
Summary of Stock Option Outstanding and Exercisable | ' | ||||||||||||||||||||||
The following table presents information related to stock options at September 30, 2014: | |||||||||||||||||||||||
Options Outstanding | Options Exercisable | ||||||||||||||||||||||
Weighted | Weighted | Weighted | |||||||||||||||||||||
Range of | Average | Outstanding | Average | Average | Exercisable | ||||||||||||||||||
Exercise | Exercise | Number of | Exercise | Remaining Life | Number of | ||||||||||||||||||
Price | Price | Options | Price | In Years | Options | ||||||||||||||||||
$ | 0.16 - $2.20 | $ | 0.56 | 1,527,950 | $ | 1.18 | 6.6 | 212,939 | |||||||||||||||
$ | 2.21 - $3.80 | 3.23 | 757,750 | 2.95 | 3.3 | 507,750 | |||||||||||||||||
$ | 3.81 - $6.99 | 4.88 | 316,000 | 4.72 | 7.2 | 282,000 | |||||||||||||||||
$ | 1.86 | 2,601,700 | $ | 3.07 | 5.1 | 1,002,689 | |||||||||||||||||
Schedule of Stock Warrants Granted | ' | ||||||||||||||||||||||
In applying the Black-Scholes option pricing model to stock warrants, the Company used the following weighted average assumptions: | |||||||||||||||||||||||
For The Three Months Ended | For The Nine Months Ended | ||||||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||||||||
Risk free interest rate | 1.69% to 2.32% | n/a | 1.69% to 2.52% | 0.87% | |||||||||||||||||||
Dividend yield | 0.00% | n/a | 0.00% | 0.00% | |||||||||||||||||||
Expected volatility | 189% to 190% | n/a | 171.0% to 190.0% | 164.30% | |||||||||||||||||||
Expected life in years | 5 | n/a | 5 | 5 | |||||||||||||||||||
Summary of Stock Warrant Activity | ' | ||||||||||||||||||||||
A summary of the stock warrant activity during the nine months ended September 30, 2014 is presented below: | |||||||||||||||||||||||
Weighted | |||||||||||||||||||||||
Weighted | Average | ||||||||||||||||||||||
Average | Remaining | Aggregate | |||||||||||||||||||||
Number of | Exercise | Life | Intrinsic | ||||||||||||||||||||
Warrants | Price | In Years | Value | ||||||||||||||||||||
Outstanding, January 1, 2014 | 2,342,846 | $ | 0.96 | ||||||||||||||||||||
Granted | 5,689,532 | 0.28 | |||||||||||||||||||||
Exercised | - | - | |||||||||||||||||||||
Forfeited | - | - | |||||||||||||||||||||
Outstanding, September 30, 2014 | 8,032,378 | $ | 0.48 | 4.5 | $ | 20,848 | |||||||||||||||||
Exercisable, September 30, 2014 | 7,782,378 | $ | 0.4 | 4.5 | $ | 20,848 | |||||||||||||||||
Summary of Stock Warrants Outstanding and Exercisable | ' | ||||||||||||||||||||||
The following table presents information related to stock warrants at September 30, 2014: | |||||||||||||||||||||||
Warrants Outstanding | Warrants Exercisable | ||||||||||||||||||||||
Weighted | Weighted | Weighted | |||||||||||||||||||||
Range of | Average | Outstanding | Average | Average | Exercisable | ||||||||||||||||||
Exercise | Exercise | Number of | Exercise | Remaining Life | Number of | ||||||||||||||||||
Price | Price | Warrants | Price | In Years | Warrants | ||||||||||||||||||
$ | 0.15 - $0.35 | $ | 0.28 | 7,439,532 | $ | 0.28 | 4.7 | 7,439,532 | |||||||||||||||
$ | 0.36 - $3.00 | 2.91 | 562,846 | 2.91 | 2 | 312,846 | |||||||||||||||||
$ | 3.01 - $4.95 | 4.95 | 30,000 | 4.95 | 3.1 | 30,000 | |||||||||||||||||
$ | 0.15 - $4.95 | $ | 0.48 | 8,032,378 | $ | 0.4 | 4.5 | 7,782,378 |
Commitments_and_Contingent_Lia1
Commitments and Contingent Liabilities (Tables) | 9 Months Ended | ||||
Sep. 30, 2014 | |||||
Commitments And Contingent Liabilities Tables | ' | ||||
Summary of Future minimum payments under operating leases | ' | ||||
Future minimum payments, by year and in the aggregate, under operating leases as of September 30, 2014 are as follows: | |||||
For years ending December 31, | Amount | ||||
2014 | $ | 35,013 | |||
2015 | 140,052 | ||||
2016 | 155,700 | ||||
2017 | 12,000 | ||||
2018 | 5,000 |
Going_Concern_and_Managements_1
Going Concern and Management's Liquidity Plans (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2013 | |
Going Concern And Managements Liquidity Plans Details Narrative | ' | ' | ' | ' | ' |
Working Capital Deficiency | $4,178,865 | ' | $4,178,865 | ' | ' |
Accumulated deficit | 29,555,796 | ' | 29,555,796 | ' | 28,130,668 |
Net Losses | 530,257 | 1,021,129 | 1,200,940 | 5,368,482 | 5,489,892 |
Net Cash Used in Operating Activities | ' | ' | $127,101 | ' | $1,024,781 |
Summary_of_Significant_Account3
Summary of Significant Accounting Policies (Details) (USD $) | Sep. 30, 2014 | Sep. 30, 2013 |
Summary Of Significant Accounting Policies Details | ' | ' |
Options | $2,601,700 | $2,188,650 |
Warrants | 8,032,378 | 2,192,846 |
Series B Convertible Preferred Stock | 4,844,143 | 3,438,275 |
Total potentially dilutive shares | $15,478,221 | $7,819,771 |
Accrued_Expenses_and_Other_Cur2
Accrued Expenses and Other Current Liabilities (Details) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
Accrued Expenses And Other Current Liabilities Details | ' | ' |
Deferred rent | $38,603 | $46,254 |
Advertising | 75,000 | 75,000 |
Salaries and benefits | 120,817 | 132,048 |
Customer payables | 456 | 39,618 |
Dividends payable | 224,188 | 279,380 |
Shares issuable | 350,080 | ' |
Accrued interest | 48,055 | 45,616 |
Accrued Rent | 46,604 | ' |
Other | 18,549 | 3,136 |
Total | $922,352 | $621,052 |
Notes_Payable_Details_Narrativ
Notes Payable (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | |
Amortization of debt discount | $64,865 | $40,400 | $182,766 | $125,163 |
Loan Agreement [Member] | ' | ' | ' | ' |
Aggregate number of Warrants purchase | 1,125,000 | ' | 1,125,000 | ' |
Warrants issued Exercise Price | $0.35 | ' | $0.35 | ' |
Warrants issued | ' | ' | 225,000 | ' |
Fair value related to warrants | 402,500 | ' | 402,500 | ' |
Fair value related to warrants as debt discount | ' | ' | $36,000 | ' |
Stockholders_Deficiency_Detail
Stockholders' Deficiency (Details) | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2013 | |
Dividend yield | 0.00% | 0.00% | 0.00% |
Expected volatility | 190.00% | 190.00% | ' |
Expected life in years | ' | ' | '6 years |
Minimum [Member] | ' | ' | ' |
Risk free interest rate | 0.97% | 0.97% | 1.13% |
Expected volatility | ' | ' | 166.00% |
Expected life in years | '3 years | '3 years | ' |
Maximum [Member] | ' | ' | ' |
Risk free interest rate | 1.75% | 1.75% | 1.50% |
Expected volatility | ' | ' | 175.00% |
Expected life in years | '5 years | '5 years | ' |
Stockholders_Deficiency_Detail1
Stockholders' Deficiency (Details 1) (USD $) | 9 Months Ended |
Sep. 30, 2014 | |
Number of options, outstanding | ' |
Outstanding, beginning of period (in shares) | 2,543,150 |
Granted | 595,000 |
Exercised | ' |
Forfeited | -536,450 |
Outstanding, end of period (in shares) | 2,601,700 |
Exercisable, end of period | 1,002,689 |
Options, weighted average exercise price | ' |
Outstanding, beginning of period (in dollars per share) | $2.37 |
Granted | $0.17 |
Exercised | ' |
Forfeited | $2.37 |
Outstanding, end of period (in dollars per share) | $1.86 |
Exercisable, end of period | $3.07 |
Weighted Average Remaining Life In Years | ' |
Weighted Average Remaining Life (in years) Outstanding | '6 years 6 months |
Weighted Average Remaining Life (in years) Exercisable | '5 years 1 month 6 days |
Aggregate Intrinsic Value | ' |
Aggregate Intrinsic Value Outstanding | ' |
Aggregate Intrinsic Value Exercisable | ' |
Stockholders_Deficiency_Detail2
Stockholders' Deficiency (Details 2) (USD $) | 9 Months Ended | |
Sep. 30, 2014 | Dec. 31, 2013 | |
Weighted Average Exercise Price Outstanding | $1.86 | $2.37 |
Outstanding Number of Options | 2,601,700 | 2,543,150 |
Weighted Average Exercise Price Exercisable | $3.07 | ' |
Weighted Average Remaining Years of Contractual Life | '5 years 1 month 6 days | ' |
Exercisable Number of Options | 1,002,689 | ' |
$0.16 - $2.20 [Member] | ' | ' |
Weighted Average Exercise Price Outstanding | $0.56 | ' |
Outstanding Number of Options | 1,527,950 | ' |
Weighted Average Exercise Price Exercisable | $1.18 | ' |
Weighted Average Remaining Years of Contractual Life | '6 years 7 months 6 days | ' |
Exercisable Number of Options | 212,939 | ' |
$2.21 - $3.80 [Member] | ' | ' |
Weighted Average Exercise Price Outstanding | $3.23 | ' |
Outstanding Number of Options | 757,750 | ' |
Weighted Average Exercise Price Exercisable | $2.95 | ' |
Weighted Average Remaining Years of Contractual Life | '3 years 3 months 18 days | ' |
Exercisable Number of Options | 507,750 | ' |
$3.81 - $6.99 [Member] | ' | ' |
Weighted Average Exercise Price Outstanding | $4.88 | ' |
Outstanding Number of Options | 316,000 | ' |
Weighted Average Exercise Price Exercisable | $4.72 | ' |
Weighted Average Remaining Years of Contractual Life | '7 years 2 months 12 days | ' |
Exercisable Number of Options | 282,000 | ' |
Stockholders_Deficiency_Detail3
Stockholders' Deficiency (Details 3) | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2013 | |
Risk free interest rate | ' | ' | 0.87% |
Dividend yield | 0.00% | 0.00% | 0.00% |
Expected volatility | ' | ' | 164.30% |
Expected life in years | '5 years | '5 years | '5 years |
Minimum [Member] | ' | ' | ' |
Risk free interest rate | 1.69% | 1.69% | ' |
Expected volatility | 189.00% | 171.00% | ' |
Maximum [Member] | ' | ' | ' |
Risk free interest rate | 2.32% | 2.52% | ' |
Expected volatility | 190.00% | 190.00% | ' |
Stockholders_Deficiency_Detail4
Stockholders' Deficiency (Details 4) (USD $) | 9 Months Ended |
Sep. 30, 2014 | |
Number of warrants, outstanding | ' |
Outstanding, beginning of period (in shares) | 2,342,846 |
Granted | 5,689,532 |
Exercised | ' |
Forfeited | ' |
Outstanding, end of period (in shares) | 8,032,378 |
Exercisable, September 30, 2014 | 7,782,378 |
Warrants, weighted average exercise price | ' |
Outstanding, beginning of period (in dollars per share) | $0.96 |
Granted | $0.28 |
Exercised | ' |
Forfeited | ' |
Outstanding, end of period (in dollars per share) | $0.48 |
Exercisable, September 30, 2014 | $0.40 |
Weighted Average Remaining Life In Years | ' |
Weighted Average Remaining Life (in years) Outstanding | '4 years 6 months |
Weighted Average Remaining Life (in years) Exercisable | '4 years 6 months |
Aggregate Intrinsic Value | ' |
Aggregate Intrinsic Value Outstanding | $20,848 |
Aggregate Intrinsic Value Exercisable | $20,848 |
Stockholders_Deficiency_Detail5
Stockholders' Deficiency (Details 5) (USD $) | 9 Months Ended |
Sep. 30, 2014 | |
$0.15 - $0.35 [Member] | ' |
Weighted Average Exercise Price Outstanding | $0.28 |
Outstanding Number of Warrants | 7,439,532 |
Weighted Average Exercise Price Exercisable | $0.28 |
Weighted Average Remaining Contractual Term | '4 years 8 months 12 days |
Exercisable Number of Warrants | 7,439,532 |
$0.36 - $3.00 [Member] | ' |
Weighted Average Exercise Price Outstanding | $2.91 |
Outstanding Number of Warrants | 562,846 |
Weighted Average Exercise Price Exercisable | $2.91 |
Weighted Average Remaining Contractual Term | '2 years |
Exercisable Number of Warrants | 312,846 |
$3.01 - $4.95 [Member] | ' |
Weighted Average Exercise Price Outstanding | $4.95 |
Outstanding Number of Warrants | 30,000 |
Weighted Average Exercise Price Exercisable | $4.95 |
Weighted Average Remaining Contractual Term | '3 years 1 month 6 days |
Exercisable Number of Warrants | 30,000 |
0.25 - $4.95 [Member] | ' |
Weighted Average Exercise Price Outstanding | $0.48 |
Outstanding Number of Warrants | 8,032,378 |
Weighted Average Exercise Price Exercisable | $0.40 |
Weighted Average Remaining Contractual Term | '4 years 6 months |
Exercisable Number of Warrants | 7,782,378 |
Stockholders_Deficiency_Detail6
Stockholders' Deficiency (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2013 | |
Accrued contractual dividends | $224,189 | ' | $224,189 | ' | $279,380 |
Selling, general and administrative expenses | 1,317,775 | 2,166,749 | 3,686,421 | 6,102,298 | ' |
Incremental shares of common stock | 2,584,748 | ' | 2,584,748 | ' | ' |
Private Placement [Member] | ' | ' | ' | ' | ' |
Principle recieved | 1,303,000 | ' | 1,303,000 | ' | ' |
Expenses | 94,241 | ' | 94,241 | ' | ' |
Shares unit sold | 8,686,670 | ' | 8,686,670 | ' | ' |
Shares price | $0.15 | ' | $0.15 | ' | ' |
Stock Option [Member] | ' | ' | ' | ' | ' |
Fair value of shares issued as compensation | ' | ' | 10,646 | ' | ' |
Weighted average fair value of the stock options granted | $0.17 | $0 | $0.17 | $1.17 | ' |
Selling, general and administrative expenses | 99,940 | 143,113 | 358,144 | 469,356 | ' |
Stock-Based compensation expense related to stock options | ' | ' | 1,259,673 | ' | ' |
Stock based compensation expense, unamortized | ' | ' | 368,104 | ' | ' |
Weighted Average Remaining Period | ' | ' | '1 year 1 month 6 days | ' | ' |
Stock based compensation expense, unamortized, performance based stock option | ' | ' | 891,569 | ' | ' |
Stock Warrants [Member] | ' | ' | ' | ' | ' |
Weighted average fair value of the stock options granted | $0.22 | ' | $0.23 | $1.36 | ' |
Selling, general and administrative expenses | 134,205 | 20,424 | 133,618 | 493,940 | ' |
Stock-Based compensation expense related to stock options | ' | ' | 578,762 | ' | ' |
Stock based compensation expense, unamortized | ' | ' | 1,922 | ' | ' |
Weighted Average Remaining Period | ' | ' | '1 year | ' | ' |
Grant date value performance based warrant, unamortized | ' | ' | 576,840 | ' | ' |
Salary expense | ' | ' | $116,667 | ' | ' |
Commitments_and_Contingent_Lia2
Commitments and Contingent Liabilities (Details) (USD $) | Sep. 30, 2014 |
Commitments And Contingent Liabilities Details | ' |
2014 | $35,013 |
2015 | 140,052 |
2016 | 155,700 |
2017 | 12,000 |
2018 | 5,000 |
Total future minimum lease payments | $347,765 |
Commitments_and_Contingent_Lia3
Commitments and Contingent Liabilities (Details Narrative) (USD $) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2013 | |
Commitments And Contingent Liabilities Details Narrative | ' | ' | ' | ' | ' |
Monthly lease rate in 2014 | ' | ' | $10,671 | ' | ' |
Monthly lease rate in 2015 | ' | ' | 10,671 | ' | ' |
Monthly lease rate in 2016 | ' | ' | 11,975 | ' | ' |
Lease expires date | ' | ' | 1-Jan-17 | ' | ' |
Deferred rent payable | 38,603 | ' | 38,603 | ' | 46,254 |
Remaining lease payments expensed | ' | ' | 46,604 | ' | ' |
Rent Expense | 66,820 | 47,921 | 210,140 | 141,257 | ' |
Company held funds in escrow | $350,080 | ' | $350,080 | ' | ' |
Concentrations_Details_Narrati
Concentrations (Details Narrative) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | |
Vendor 1 [Member] | ' | ' | ' | ' |
Concentration Percentage Purchases | 76.00% | 63.00% | 68.00% | 60.00% |
Percentage vendor represented payables | 30.00% | 24.00% | 30.00% | 24.00% |
Vendor 2 [Member] | ' | ' | ' | ' |
Concentration Percentage Purchases | 12.00% | 12.00% | 14.00% | 15.00% |
Related_Party_Transactions_Det
Related Party Transactions (Details Narrative) (USD $) | Sep. 30, 2014 | Dec. 31, 2013 | Sep. 30, 2014 |
Related Party Outstanding [Member] | |||
Principal repayments towards the outstanding advances | ' | ' | $235,000 |
Estimated value of collateral | $4,286 | $9,001 | ' |